UK Economy Has Entered A Recession Amid Cost-of-Living Crunch

UK Economy Has Now Entered Recession Amid Cost-of-Living Crunch

London, UK, Monday, February 19, 2024 – The UK economy officially entered a technical recession in the final quarter of 2023, according to data released on February 15 by the Office for National Statistics (ONS). 1

Gross domestic product (GDP) contracted by 0.3% following a 0.1% decline in the previous quarter, marking the first back-to-back decrease since the COVID-19 pandemic. 2

This is essentially a technical recession, defined as two consecutive quarters of negative GDP growth.

“The decline was primarily driven by the service sector, the backbone of the UK economy, as rising inflation and the cost-of-living crisis put pressure on household spending and business investment,” one report said.

Economists warn that the UK faces challenges with high inflation, fueled by global energy prices and supply chain disruptions, and slowing global growth.

While the Chancellor of the Exchequer acknowledged the challenges, he downplayed concerns about a prolonged recession, emphasizing steps taken to address the cost-of-living crisis and support businesses.

Following the release of Office for National Statistics (ONS) data showing a 0.3% drop in GDP for the final quarter of 2023, Chancellor of the Exchequer Jeremy Hunt denied accusations of complacency, emphasizing plans to address economic challenges. 3

However, he also hinted at potential tax cuts in the upcoming March 6 budget, sparking concerns about their feasibility amidst tightening public finances.

While downplaying the recessionary implications, the Chancellor acknowledged economic difficulties and suggested a link between lower taxes and economic growth.

Treasury sources reported internal discussions on squeezing public spending to fund potential tax cuts in the upcoming budget.

This economic slowdown follows a 7.5% rebound in 2021, with growth significantly stalling in 2023.

The Bank of England forecasts a potential full-year contraction, exacerbated by inflation reaching a 40-year high of 11.1% in October 2023.

Sources
  1. UK Economy: https://www.ons.gov.uk/[↩]
  2. UK Economy: https://www.ft.com/content/b48cfce5-6a0b-4811-9e17-847da43d9a33[↩]
  3. UK Economy: https://www.independent.co.uk/business/chancellor-insists-there-is-light-at-end-of-tunnel-despite-uk-s-recession-dip-b2496699.html[↩]
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